CFPB proposes further changes to mortgage rules

Yesterday, the CFPB proposed additional changes to the mortgage rules adopted in January 2013. Comments on the proposed changes are due by July 22, 2013.

The CFPB proposes to:

• Revise the definition of points and fees for purposes of the ability to repay and high-cost loan rules to provide that fees and charges (a) paid by the seller or other third party are included in points and fees, subject to an exception, and (b) paid by the creditor, other than compensation paid to a loan originator that is not an employee of the creditor, are excluded from points and fees. A finance charge item paid by the seller or other third party is not included in points and fees if the item qualifies for one of the specific finance charge exclusions from points and fees. Based on the proposed approach, title charges paid to an affiliate of the creditor by a seller or other third party are included in points and fees, but would not be included in points and fees if paid by the creditor.

• Revise the loan originator compensation rule to (a) modify the definition of “loan originator” with regard to when certain administrative or clerical personnel, such as tellers or greeters, may become loan originators when providing contact information or credit applications to consumers, (b) move the effective date of certain provisions, including provisions regarding compensation, qualifications and record retention, from January 10, to January 1, 2014, and
(c) provide clarifications regarding prohibited payments to loan originators.

• Revise the prohibition on the financing of single premium credit insurance
to clarify (a) what constitutes the financing of such premiums and (b) when credit insurance premiums are considered to be calculated and paid on a monthly basis and, thus, not subject to the prohibition. The CFPB also seeks comment on when the prohibition should be effective January 10, 2014 or an earlier date.

• Revise the loss mitigation provisions in the Regulation X servicing rule to (a) provide more flexibility to servicers to set and describe the date by which borrowers should supply missing information regarding loss mitigation applications, and procedures for a servicer to follow if an application is later found to be missing documentation or information necessary to the evaluation process, and (b) provide servicers more flexibility to provide short-term payment forbearance plans based on the evaluation of an incomplete loss mitigation application.

• Revise the high-cost mortgage loan rule to permit small creditors to make balloon high-cost loans without regard to whether the creditors operate predominately in “rural” or “underserved” areas, as long as the loan meets the requirements for either the standard or transitional small creditor balloon qualified mortgage.

• Revise the higher-priced mortgage loan rule to broaden the exemption from the mandatory escrow account requirement for small creditors to permit a small creditor to qualify for the exemption if it extended more than 50 percent of its total covered first-lien loans in “rural” or “underserved” areas in any of the three preceding calendar years (instead of in the preceding calendar year).

We are analyzing the proposal and plan to write more about the points and fees, loan originator compensation and single premium credit financing proposals.

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